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by Jason Snell & Dan Moren

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The coming cord-cutter apocalypse

Sports Illustrated’s Jon Wertheim has done some math that suggests that a future where we’re all cord cutters bodes ill for the economic underpinnings of sports. ESPN would need to charge $30/month, and for regional sports networks (and the teams they fund via rights fees) the story is worse:

Regional sports networks (RSNs), for one, which charge between $2 and $3 a month. Ratings suggest that only a very small percentage of subscribers would pay that voluntarily. Take Denver, a market of 1.57 million cable households. During Rockies games, Root Sports Rocky Mountain draws 37,000 viewers… Do the back-of-the-envelope math, and the Denver RSN would have to charge more than $1,000 per subscriber annually to offset the drop in reach. “That whole business model is going to explode,” says Tom Spock, another Scalar founding partner.

I’m a sports fan, and live sports is one of the reasons I haven’t cut the cord yet. But it’s undeniable that, indirectly, every subscriber to cable or satellite TV is subsidizing the sports industry, especially on the regional level—and if people who don’t care about sports have the ability to opt out, the economics of the entire industry could fall apart.

(Update: Interesting argument about embedded channel costs from Alex Tabarrok via Roshan Vyas. I’m not saying that Wertheim’s math is perfect, but the sports industry has extracted huge amounts of money from cable and satellite providers because live sports are seen as one of the last bulwarks against cord cutting. If everyone cutting the cord is inevitable, that proposition disappears, and what’s left is a product that has to be priced for a la carte sale or rolled into other, larger bundles. Wertheim’s piece mentions that as a possible outcome—not a premium subscription for your local sports franchise of choice, but games being integrated to other specific offerings. For example, San Francisco Giants fans might need to subscribe to an NBC streaming package to gain access to games.)